Despite Weak Dollar, U.s. Companies Invest Heartily Abroad

May 23, 1988|By New York Times News Service.

Hackett and other American executives cite other reasons for maintaining or expanding foreign operations. One is trade barriers that limit exports to Europe and other lucrative overseas markets-particularly barriers that might be erected by the Common Market in the early 1990s. Another is concern that a foreign operation, once dismantled, would be hard to re-establish in the event that the dollar rebounded in value.

``It is very impractical to abandon a plant overseas on something as whimsical as exchange rates,`` Hackett said.

The stepup in investment abroad means that the nation`s trade deficit, despite dramatic improvements like the one in March, will probably remain substantial.

Commerce Department statistics underscore the point. Sales from the overseas affiliates of American companies totaled $704 billion in 1985, the most recent tabulation. The 1986 figure, due out next month, will probably show an increase, some economists say.

Included in the 1985 total was $410 billion sold in the foreign country where the affiliate was located-for example, Apple computers made and sold in Ireland-and $294 billion in exports that American companies shipped from one foreign country to others-as Apple ships computers from Ireland to the rest of Europe. By comparison, exports from the United States were worth only $216 billion in 1985.

``The multinationals are still tremendous exporters from this country, of course, but the wave of the future is production abroad, not exports,`` said John Hind, an economist at the Conference Board, a business research organization.

Such a possibility is fueling concern that the interests of American companies are diverging from national interests as U.S. corporations globalize their production, spreading employment, earnings and technology among many countries.

``The struggle to define a new relationship between corporation and nation will be one of the central economic and political tasks of our era,``

Robert B. Reich, a professor at Harvard University`s Kennedy School of Government, writes in the current issue of the Atlantic.

The proclivity of American corporations to invest large sums in foreign manufacturing is not new. For 40 years, American companies have been building a network of foreign operations that surpasses any other nation`s. But in the 1960s and 1970s, the most advanced and most profitable products were made in the United States and exported. Ultimately, American companies manufactured many of the products abroad, but that often happened several years later.

Now the gap between product introduction and foreign production has been greatly shortened. Companies design many new products for simultaneous production and sale here and abroad.

Other factors are also encouraging greater foreign production.

One is that the U.S. leadership in many fields of technology has narrowed, if not disappeared. As a result, many American companies feel compelled to set up manufacturing and research facilities in high-technology centers abroad in order to keep apprised of the most sophisticated technology. Another factor behind the strong investment abroad is the robust profits made last year by American companies in Europe and East Asia.

``A characteristic of foreign investment is that you tend to accumulate earnings in profitable overseas markets and bring back only a part of this profit,`` said Robert Lipsey, an economist with the National Bureau of Economic Research.